Oregon Supreme Court Overturns Ruling on $20 Million Subrogation Claim Due to Lack of Clear Waiver

The Oregon Supreme Court has made a landmark ruling in the case of Certain Underwriters v. TNA NA Manufacturing, reversing previous lower court decisions that had invalidated a $20 million subrogation claim based on a supposed tort liability waiver within a $32,000 equipment purchase agreement. Lloyd’s of London, insuring a food processing equipment buyer, faced a significant loss after the equipment was implicated in a costly recall. Seeking to recoup the losses, Lloyd’s pursued subrogation against the equipment’s manufacturer. However, the manufacturer initially secured summary judgment, arguing the purchase agreement waived any tort liability.

The state’s highest court, however, highlighted a fundamental legal principle: the presumption against the contractual waiver of tort liability. It stated that for a waiver to be legally binding, it must be articulated through clear, explicit, and unequivocal language, a standard not met in the disputed contract. The court criticized the lower courts’ reliance on broad, inferential language as a basis for finding a waiver of liability, underscoring the necessity for contracts to specifically and unmistakably articulate such waivers to be enforceable.

This decision underscores the complexities surrounding contract language and the implications for subrogation claims within the insurance industry. It also serves as a cautionary tale for relying on generic, broad contractual disclaimers to waive tort liability. By setting a high bar for the enforcement of tort liability waivers, the ruling protects the right to pursue subrogation, reinforcing the importance of precise contract drafting to avoid potential legal pitfalls.